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In the morning trading today, the A-share market opened lower and fluctuated slightly. Blue chip stocks continued to strengthen against the trend. The Shanghai Composite Index 50 and the CSI 300 both rose slightly. More than 4,100 stocks in the two markets fell, and trading volume showed a slight shrinking trend.

Screenshot from: Wind

On the market, public transportation, pork, nonferrous metals, and banks were among the top gainers, while household goods, digitalization of finance and taxation, CXO concepts, and copper cable high-speed connections were among the top losers.

01

Pork prices continue to rise

In the morning, the main contract of live pig futures jumped up and opened higher, and once soared straight up during the session, up 3.65%, approaching the highest point of the year. As of press time, although the increase has fallen back, it still rose by more than 2%, and the half-day transaction volume far exceeded the full-day transaction volume of the previous trading day.

Boosted by this, pork concept stocks rose against the trend, and the sector index opened higher and rose by more than 2%. Xiangjia shares rose vertically by the daily limit in just about 3 minutes after opening, and Luoniushan, Superstar Agriculture and Animal Husbandry, Tiankang Biotechnology, and Longda Food were among the top gainers.

Chicken and agriculture, forestry, animal husbandry and fishery sectors also bucked the trend, with Xiaoming Shares, Zhongshui Fishery and New Wufeng leading the gains. Breeding ETF, livestock ETF and Agriculture 50ETF also rose strongly.

According to the monitoring of the Ministry of Agriculture and Rural Affairs, in June, the average price of pork in the national agricultural product wholesale market was 24.21 yuan/kg, up 6.84% from 22.66 yuan/kg in May and up 28.30% from 18.87 yuan/kg in the same period last year.

Recently, due to widespread rainfall across the country, farmers are not very enthusiastic about selling pigs. In addition, traffic is blocked, the supply of pigs in the market is reduced, and downstream procurement is difficult. In the short term, there is a situation of supply exceeding demand, which supports the accelerated rise in pork prices.

Zhuochuang Information Monitoring shows that the bullish expectations of southern farms are relatively strong, and after the digestion of fat pigs in the previous period, there is less inventory and more demand for large pigs recently, and sales are accelerating, which has prompted the breeding end to carry out equivalent operations of holding back the pigs, thereby driving up the average transaction weight.

The continued recovery in pork prices has led to a significant improvement in the performance of pig breeding and sales companies.

Today, Wen's shares announced that it expects a net profit of 1.25 billion yuan to 1.5 billion yuan in the first half of 2024, turning losses into profits year-on-year. In the morning, Wen's shares opened higher and rose, once soaring by more than 5%.

Wen's shares said that during the reporting period, the company sold 14.3742 million pigs (including live pigs and fresh products), a year-on-year increase of 21.96%. The average sales price of live pigs was 15.32 yuan/kg, a year-on-year increase of 5.09%.

Muyuan shares also expects to achieve a net profit of 900 million to 1.1 billion yuan in the first half of the year, also reversing the loss year-on-year. Muyuan shares also opened high in the morning and once surged by more than 4%.

New Hope Group expects a net loss of 1.2 billion yuan in the first half of the year, a year-on-year reduction of 59.77%. Based on the loss of 1.934 billion yuan in the first quarter, New Hope Group expects a profit of more than 700 million yuan in the second quarter. New Hope Group also opened higher in the morning and continued to rise.

Guotai Junan Securities stated that the pig production capacity has been eliminated for 16 months and has been at its lowest level since 2021. Currently, there are few entities in the industry capable of replenishing production capacity in large quantities. Against the background of high debt in the industry and low pig price expectations, the industry does not have sufficient cash to replenish production capacity in the first place when it makes profits. It is expected that production capacity will remain at a low level for a long time, thereby prolonging the duration of this cycle.

Pig prices have achieved good profits. As the cycle continues to rise, the performance of pig farming companies is expected to be gradually realized. At present, the valuation of pig farming companies has returned to the bottom range. It is recommended to select high-quality companies with excellent cost control and sustainable expansion.

02‍

Many bank stocks hit new highs

Bank stocks collectively strengthened in the morning, and the sector index hit a new record high. Individual stocks also hit new highs collectively.

Among them, China Construction Bank surged by more than 2%, successfully breaking through the historical high in January 2018 (adjusted, the same below). Industrial and Commercial Bank of China also broke through the historical high in 2018. Agricultural Bank of China and Bank of China continued to break historical records. Chongqing Rural Commercial Bank, Bank of Beijing and others also set new highs in many years.

Today, the People's Bank of China announced that in order to hedge the impact of factors such as the tax peak and maintain a reasonable level of liquidity in the banking system, on July 15, 2024, the People's Bank of China conducted a 100 billion yuan medium-term lending facility (MLF) operation with a winning rate of 2.5%, fully meeting the needs of financial institutions.

In addition, last week, bank stocks saw a peak in dividends, with more than 12 listed banks including Industrial Bank, CITIC Bank, China Merchants Bank, and China Minsheng Bank distributing cash dividends, with a total dividend amount of 266.9 billion yuan.

Wind data statistics show that the dividend yields of China Merchants Bank and Bank of Beijing exceed 7%, while the dividend yields of China Construction Bank, Postal Savings Bank of China, Bank of Communications and others exceed 6%.

With the continuous development of China's economy, the scale of China's banking industry has continued to grow. Recently, the British magazine "The Banker" officially released the list of the top 1000 banks in the world in 2024 (note: calculated based on tier-one capital).

Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China are the top four banks in the world, and Industrial and Commercial Bank of China has topped the list for a record-breaking 12 consecutive years. In the top 20 list, Chinese banks account for half of the total, occupying 10 seats.

CITIC Securities believes that OMO has gradually become the core of policy interest rates. Optimizing loan pricing benchmarks will help improve interest rate transmission efficiency, balance funding and credit market goals, alleviate the impact of asynchronous deposit and loan pricing, and help stabilize bank interest rate spreads.

In addition, the June financial data continued to be characterized by light scale and good structure, and it is expected that the monetary and fiscal policies will continue to work in both directions to boost the economy in the next stage. From the perspective of sector investment, the previous multi-party policy efforts have helped improve bank risk expectations, and the valuation of bank stocks has been further supported by fundamentals, further consolidating the certainty of dividend income space.

Editor: Chen Lixiang

Proofreading: Yang Lilin